By Neil Maidment
LONDON, March 4 Britain's Premier Foods
announced a 1.13 billion pound ($1.89 billion) refinancing plan
on Tuesday as part of an ongoing restructuring aimed at reducing
its debts and reviving the business.
The maker of Mr Kipling cakes and Bisto gravy has spent the
past few years selling assets, reshaping its business and
cutting costs to help reduce debt built up during an acquisition
spree, switching its focus to growing its top grocery brands.
In an expected move, the firm said it would raise a total of
353 million pounds via a placing of new shares and a rights
issue, and a further 475 million pounds through a bond issue.
It said it had also secured a new 300 million pound banking
facility, reducing its lending syndicate from 28 to 7 parties,
and had struck a new pensions agreement.
In January, Premier Foods said it would hand control of its
struggling Hovis bread business to U.S. investment firm The
Gores Group, in a deal it believes will allow for greater
investment in the division, and free-up its focus on groceries.
"What we've been working on is a strategy to take away in
one fell swoop the three big issues that have over-burdened our
company; uncertainty over bread, the scale of our debt and the
scale of our commitment to the pension scheme," Chief Executive
Gavin Darby told Reuters.
"This new capital structure will liberate Premier Foods from
its past and provides a great platform on which to execute our
category based strategy," he said.
Premier Foods, whose eight best-selling brands also include
Batchelors and Ambrosia, said it would raise 100 million pounds
by placing 77 million shares at 130 pence apiece, while an 8 for
5 rights issue of 507 million shares at 50 pence would raise 253
The capital refinancing plan is subject to approval by
shareholders at a meeting on March 20.
Darby said the new six-year pensions agreement would see the
firm reduce cash payments by 156 million pounds over the next
three years, when compared with its previous deal.
Group net debt at Dec. 31, 2013 stood at 830.8 million
pounds, the firm said, and when adjusted for the refinancing
fell to 513 million pounds, taking group net debt to core
earnings (EBITDA) down from around 5 times to 3.3 times.
Premier Foods said it had agreed with lenders to pay a
dividend to shareholders when the ratio falls below 3 times.
Its shares were down 5 percent to 133 pence at 0944 GMT.
The company also posted on Tuesday a 12.3 percent fall in
2013 trading profit to 139.5 million pounds. Stripping out the
contribution of disposed businesses during the year, trading
profit rose 17.7 percent to 145.2 million pounds.
The group said it was confident of its prospects for 2014.